Investors are interested in new real estate projects even in the Covid-19 context

Real estate investors still show interest for acquisitions of new projects in Romania, even in the context of the Covid-19 epidemics, shows a study conducted by Colliers International on the investment market among more than 60 real estate companies representing investment funds, developers, asset managers and banks.

At the same time, almost 70% of the investors active in the land segment claim that they plan to conclude all or at least some of the transactions already on-going, according to a study dedicated to the land market conducted among 115 professionals active in this real estate segment.

Bucharest remains the epicenter of investments this year

Most real estate market players are seeking to better understand the current situation before making investment decisions (64%).

However, almost a quarter of participants to Colliers study declare that, should an opportunity with favorable transaction conditions arise, they would invest even considering the uncertainties of the current context.

Bucharest remains the preferred location for new investments for about 57% of respondents while over 25% are open to new investment opportunities in regional cities, which could boost the regional real estate market especially as only 5% of them currently hold properties outside Bucharest. Both Bucharest and regional cities remain venues for a buy-and-hold strategy, as most of the respondents owning properties either in Bucharest or regional cities prefer to keep them over the long term.

74% of investors expect tighter financing terms

However, investors expect tighter financing conditions and appreciate that the crisis could have long lasting effects on the real estate market, with complex implications both for future rental income as well as prices, Colliers International’s study in the investment market shows.

Two thirds expect a decrease in financing availability, while 59% believe that financing costs will increase. Consequently, it is expected that good quality projects and relationship track record with the bank will matter increasingly more in the credit analysis process.

Almost 70% of the investors active in land transactions intend to move ahead with the on-going deals

In the land market, almost 70% of the active transaction players intend to progress with all or some of the on-going deals in 2020, with 43% of respondents to Colliers International’s study in the land segment expecting to close a transaction in the next 3 months, highlighting the fact that the market is active.

Furthermore, the majority of the investors who do not foresee the close of a transaction on the short-term expect to complete a deal by the end of the year. Thus, only 16% of the total interviewed do not expect to close any land deal in 2020.

In terms of the evolution of land prices, 44% of the investors interviewed expect them to decrease in the near future, while a similar share does not have a clear-cut expectation at the moment. The study also reveals that the market sector the investor is acting in (be it residential, office, retail or mixed use) as well as the position in terms of seller or buyer have very little influence on the current perception of land price evolution.

Covid-19 is expected to have long lasting effects

More than 67% of investors expect that the implications of the current Covid-19 epidemics on the Romanian economy will last longer than a year, shows the Colliers International study on the investment market.

However, there is a bit more optimism regarding the real estate market, with 35% counting on a recovery in less than a year, while investors forecasting implications for the real estate market for over a year are fewer (52%) than those expecting effects on the overall economy for a longer timeframe (67%).

Investors are even more optimistic when it comes to their own company, with 27% expecting to recover in less than 6 months and 38% in less than a year, which can be seen as a sign of trust in their business’ viability.

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